Your Home Loan Can Help You Save Money


If you have the requisite funds in your savings account, would you opt for a Home Loan to buy your dream house? The answer is NO as no one prefers to pay additional interest on loans they do not need. But, the reality is something else. Real estate is expensive, and people do not necessarily have the funds on hand to invest in their dream homes. Thus, the Home Loan has become a favourite product in the industry.

Home Loans can run into several lakhs of rupees. Therefore, if you can save even half a percentage point in the rate of interest, you can save a considerable amount by the end of the loan tenure. Let us look at how your Home Loan can help you save money.

1.       Awareness is the key

Many people are not aware of the concept of credit score. Some lenders take advantage of this ignorance and say that their low credit score prevents the bank from offering a lower rate of interest. Understand that banks refer to the credit report to determine your credit history and credit score. You can also procure your credit report for free. Check out your credit score before you apply for a Home Loan. You might be able to get a home loan at a lower interest rate.

2.       Explore all options

All banks in India offer similar facilities and have comparable products. It is not necessary for you to stick to a particular bank alone. Explore all options and do your research. Online loan service providers like can make the comparison for you free of charge. You can compare various products of different banks on a single screen. Use this option to search for a Home Loan at the Lowest Interest Rate.

3.       Contribute more towards margin money

Banks look for a Loan to Value ratio of around 80%. Your contribution is the margin towards the Home Loan. Though the standard norm is 80%, you can increase your contribution and reduce the loan component. It’s better to make a higher down payment if you have the necessary idle funds in your savings accounts. It can help reduce your loan burden and save you a lot of money as interest. Therefore, contribute as much as you can and try to reduce the loan burden to the maximum extent.

4.       Negotiation is the key

People can negotiate various factors with lenders. It includes your rate of interest as well. Lenders give concessions to borrowers having good credit scores. Check your credit report in advance and negotiate with your lender for better interest rates if you have a good credit score. A concession of even half a percentage point in the rate of interest can save you a considerable amount over the entire tenure of the loan.

5.       Be aware of the EMIs for different tenures:

People believe that a longer tenure is beneficial because it has a lower EMI (Equated Monthly Instalment). On the contrary, you end up paying more. This simple trick will help you save a lot of money. Compare your home loan EMI for 20 years and 15 years for your loan amount. The difference will not be much.

The EMI for 20-year tenure on a loan of Rs. 40 lakhs @ 9% is Rs. 35,989. Over a 20-year period, you end up paying Rs. 4,637,369 as interest alone. Compare the figures for 15 years. The EMI for the same loan for 15 years is Rs. 40,571. At the end of the 15-year period, you pay a sum of Rs. 3,302,719 as interest. Therefore, by paying about Rs. 4,500 more per month, you save more than Rs. 1,300,000 in interest over the tenure of the loan.

6.       Try a Home Loan Balance Transfer (HLBT)

The rates of interest on your home loan are continually changing. The competition among the banks is intense in this field. Hence, if you get a better offer at a later date, you should opt for an HLBT. Check out your Home Loan eligibility with new lenders. You can save a significant quantum of money as interest.

7.       Know your tax concessions

The Government of India has allowed Home Loan borrowers a lot of concessions in income tax under the Income Tax Act 1961. Consult an income tax expert and take advantage of the multiple concessions available to you. You can save a considerable sum in the form of tax benefits.

These seven tips can help you save money. It is your right to take all measures to save your hard-earned money.

Also Read:  5 Most Common Types of Loans in India

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